The Autumn Statement – how will the measures announced affect students and apprentices?
There were only a few announcements in the recent Autumn Statement which will affect students and apprentices. We explain below how these changes may affect you.
Those with incomes just above the tax threshold will benefit in a small way from some of the tax cuts on offer. But as the welfare state (aside from the state retirement pension) remains a prime target for cuts, the Statement contains small comfort for those on the lowest incomes who do not earn enough to pay tax.
It had previously been announced that the personal allowance (the amount of income you can have in a tax year before you become liable to income tax) would be increased from 6 April 2015 to £10,500 (up from £10,000) for anyone born after 5 April 1948. Today the Chancellor increased it yet further to £10,600.
This potentially saves most basic rate taxpayers an additional £120 a year (in basic terms rather than real terms, as it does not take into account any increase in cost of living due to inflation). But where people both pay tax and receive means-tested benefits that are calculated using net income, any reduction in tax will lead to a corresponding reduction in their benefit entitlement. For example, those in receipt of Universal Credit who are basic rate taxpayers will be only £42 better off whereas non-benefit claimants will benefit by the full £120. In addition, many low earners will see no advantage from the increase in the tax-free allowance at all, because they earn under the current threshold.
Thus, raising the tax allowance may not be the most efficient way of improving the financial position of people on low incomes.
The primary earnings thresholds for employees’ National Insurance contributions (NIC) – that is, the point at which employees start to pay NIC – will remain at current levels, so that employees earning between that (£7,956 in 2014/15) and the personal allowance will continue to pay NIC on that slice of their earnings, despite paying no income tax. One way of simplifying the system while supporting the lower paid would be to align the primary earnings threshold with the uprated personal allowance – although it would be necessary to ensure that nobody whose earnings currently entitled them to contributory benefits would lose out as a result of the change.
National Minimum Wage enforcement
The National Minimum Wage (NMW) provides important protection for low earners. We therefore welcome the announcement in the Autumn Statement that the government will increase funding for HMRC NMW enforcement activity in 2015-16 by £3 million.
This will help to ensure that workers receive at least the hourly minimum rates set and that employers and workers are better aware of their obligations and rights – vital in light of figures such as arrears, that is money which is owed and should have been paid earlier, being found in 47% of the cases investigated by HMRC in 2013/14.
However, what certain low-paid earners, for example students working part-time, would no doubt also appreciate is a rethink of the underlying rules that exclude travel time and unreimbursed expenses from the NMW calculation.
Apprentices – Welcome cut in NIC for those employing apprentices
As previously announced, from April 2015, no employer’s NIC will be payable for those aged under 21. In the autumn statement this relief was extended to those apprentices aged under 25.
There is some good news for students as the government will remove the cap on student numbers from 2015-16 onwards.
Student loans will be available for graduates who plan to continue to study on a post-graduate taught masters course. Although this is positive news, there are some drawbacks as the student must be under 30 years old, the loans, of up to £10,000, will only be available from 2016-17 onwards and will be repaid at the same time as undergraduate student loans.